Euro zone core inflation beats expectations

pore over the first release of July's zone inflation numbers as German retail sales data point to a core euro zone powering upwards. Ciara Lee reports.

▲ Hide Transcript

▶ View Transcript

On a spending spree
German retail sales rose more than expected in June, up 1.1 percent.
Consumption continues to power past exports as the main driver of growth, supported by a robust labour market and low interest rates.
SOUNDBITE (English) JEREMY COOK, CHIEF ECONOMIST & HEAD OF CURRENCY STRATEGY AT WORLD FIRST, SAYING:
"The wage picture in Germany is looking very decent. Unemployment is continuing to run lower. So everything is set up certainly with the very very low interest rates from the European Central Bank at the moment. Everything is set up for a consumption move higher within Germany."
Also moving higher - core euro zone inflation, accelerating to a four-year high this month.
While euro zone unemployment fell to its lowest in eight years in June.
They're two encouraging signs for the ECB as it considers reducing its monetary stimulus.
The EU statistics office estimates headline growth in consumer prices was stable at 1.3 percent year-on-year in July.
But still a long way off the ECB's 2 percent target.
SOUNDBITE (English) JEREMY COOK, CHIEF ECONOMIST & HEAD OF CURRENCY STRATEGY AT WORLD FIRST, SAYING:
"To be honest inflation everywhere in the developed world is not running hot enough for policymakers to believe that it is A. sustainable and B. good enough to start balancing rate hikes on top of."
Unemployment also went down in Italy and Spain - the two euro zone countries with the highest rates, other than Greece.
In Germany, the biggest kid on the bloc, unemployment fell to 3.8 percent in June - raising expectations of bigger wage rises strengthening growth in the euro zone as a whole.

Reuters, the news and media division of Thomson Reuters, is the world’s largest international multimedia news provider reaching more than one billion people every day. Reuters provides trusted business, financial, national, and international news to professionals via Thomson Reuters desktops, the world's media organizations, and directly to consumers at Reuters.com and via Reuters TV. Learn more about Thomson Reuters products: